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om_chapter_9_-_copy.pptxSUPPLY CHAIN DESIGN
CHAPTER 9
DAVID A. COLLIER AND JAMES R. EVANS
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 9 SUPPLY CHAIN DESIGN
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9-1 Explain the concept of supply chain management.
9-2 Describe the key issues in designing supply chains.
9-3 Define metrics used in evaluating supply chain performance.
9-4 Explain important factors and decisions in locating facilities.
9-5 Describe the role of transportation, supplier evaluation, technology, and inventory in supply chain management.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Understanding Supply Chains
A supply chain is a key subsystem of a value chain that focuses primarily on the physical movement of goods and materials along with supporting information through the supply, production, and distribution processes.
Key Functions: Purchasing and procurement of materials and supplies, sales and order processing, operations, inventory and materials management, transportation and distribution, information management, finance, and customer service.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Understanding Supply Chains
Distribution centers (DCs) are warehouses that act as intermediaries between factories and customers, shipping directly to customers or to retail stores where products are made available to customers.
Inventory refers to raw materials, work-in-process, or finished goods that are maintained to support production or satisfy customer demand.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Exhibit 9.1
Typical Goods- Producing Supply Chain Structure
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Understanding Supply Chains
Supply chain management (SCM) is the management of all activities that facilitate the fulfillment of a customer order for a manufactured good to achieve satisfied customers at a reasonable cost.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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The Supply Chain Operations Reference (SCOR)
Model is a framework for understanding the scope of SCM based on five basic functions:
Plan: Developing a strategy that balances resources with requirements.
Source: Procuring goods and services to meet planned or actual demand.
Make: Transforming goods and services to a finished state to meet demand.
Deliver: Managing orders, transportation, and distribution to provide the goods and services.
Return: Customer returns, maintenance, dealing with excess goods.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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The Supply Chain at Dell
Purchasing and supplier partnerships:
Keyboards are sourced in Mexico, soundcards in France, and power supplies, disk drives, and chips in Asia.
Dell pulls component parts into its factories based on actual customer orders and carries no finished goods inventory, relying on information technology to drive its supply chain.
Sustainability is a key part of Dell’s supply chain:
Renewable energy use, recycling, and integration of a sustainability strategy.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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The Supply Chain at Dell
IT Infrastructure using an Oracle database supports Dell’s supply chain.
Key modules:
Configuration management
Procurement
Cost Management
Inventory
Accounts payable
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Designing the Supply Chain
A contract manufacturer is a firm that specializes in certain types of goods-producing activities, such as customized design, manufacturing, assembly, and packaging, and works under contract for end users.
Advantages of using contract manufacturing:
Access to advanced manufacturing technologies
Faster product time-to-market
Customization of goods in regional markets
Lower total costs resulting from economies of scale
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Designing the Supply Chain
Efficient supply chains are designed for efficiency and low cost by minimizing inventory and maximizing efficiencies in process flow. Examples: Wal-Mart and Proctor & Gamble.
Responsive supply chains focus on flexibility and responsive service and are able to react quickly to changing market demand and requirements. Examples: Nordstrom’s and Apple.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Designing the Supply Chain
A push system produces goods in advance of customer demand using a forecast of sales and moves them through supply chain to points of sale where they are stored as finished goods inventory.
A pull system produces only what is needed at upstream stages in the supply chain in response to customer demand signals from downstream stages.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Exhibit 9.2 Supply Chain Push-Pull Systems and Boundaries
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Designing the Supply Chain
Postponement is the process of delaying product customization until the product is closer to the customer at the end of the supply chain.
Example: A manufacturer of dishwashers that would manufacture the dishwasher without the door and maintain inventories of doors at the distribution centers. When orders arrive, the doors can be attached quickly and the unit can be shipped. This would reduce inventory requirements.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Sustainable Supply Chains
A green sustainable supply chain can be defined as "the process of using environmentally friendly inputs and transforming these inputs through change agents—whose byproducts can improve or be recycled within the existing environment.”
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Sustainable Supply Chains
Environmental performance-enhancing supply chain management activities:
Substantially decreasing scrap, packaging, and material losses.
Adopting paperless practices for information processing.
Lowering expenses associated with hazardous materials.
Increasing revenues by converting wastes to by-products.
Reducing water and energy requirements.
Decreasing the use and waste of solvents, paints, cleaning fluids, and other chemicals.
Selecting suppliers that support sustainability.
Recovering valuable materials and assets through efficient product take-back and recycle programs.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Sustainable Supply Chains
“Our data indicates that upwards of 60 to 70 percent of a company’s carbon footprint is found along their supply chain,”
says Ms. Annie Berger,
Relationships Director of greensupplychain.org.
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Sustainable Supply Chains
Manufactured good recovery:
Reuse or resell
Repair
Refurbish
Remanufacture
Cannibalize parts
Recycle goods
Incineration or landfill disposal
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Sustainable Supply Chains
Reverse logistics refers to managing the flow of finished goods, materials, or components that may be unusable or discarded through the supply chain from customers toward either suppliers, distributors or manufacturers for the purpose of reuse, resale, or disposal.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Exhibit 9.3 Example of a Manufactured Good Recovery (Reverse Logistics) Supply Chain
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Measuring Supply Chain Performance
Delivery reliability, such as perfect order fulfillment.
Responsiveness, such as order fulfillment lead time or perfect delivery fulfillment.
Customer-related measures focus on the ability of the supply chain to meet customer wants and needs.
Supply chain efficiency measures, such as average inventory value and inventory turnover.
Sustainability measures, such as water discharge, CO2 emissions, and energy reductions.
Financial measures, such as total supply chain costs and costs of processing returns and warranties.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Measuring Supply Chain Performance
The bullwhip effect results from order amplification in the supply chain: a phenomenon that occurs when each member of a supply chain “orders up” to buffer its own inventory.
Many firms counteract this phenomenon by using common data from the point of the supply chain closest to the customer, smaller order sizes, stabilizing price fluctuations, and sharing information.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 9 SUPPLY CHAIN DESIGN
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Location Decisions in Value Chains
Location decisions can have a profound effect on supply chain performance and a firms’ competitive advantage.
The type of facility and its location affect the supply chain structure.
Location decisions in value chains are based on:
Economic (facility costs, operating costs, and transportation costs)
Non-economic (labor availability, legal and political factors, community environment) factors
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 9 SUPPLY CHAIN DESIGN
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Exhibit 9.5 Example Location Factors for Site Selection
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Location Decisions in Value Chains
Location Decision Process:
Global location
Regional location
Community location
Local site location
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Center of Gravity Method
The center of gravity method determines the X and Y coordinates (location) for a single facility.
Takes into account locations, demand, and transportation costs to arrive at the best location.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 9 SUPPLY CHAIN DESIGN
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:
Exhibit 9.6 Excel Location Analysis for Fountains Manufacturing Template
Solved Problem
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Chapter 9 SUPPLY CHAIN DESIGN
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96(400)+70(300)+120(200)+110(100)+130(300)+40(100)
58(400) + 80(300) + 30(200) + 90(100) + 127(300) + 65(100)
C =
C =
Solution: Center of Gravity Calculations
x
y
400 + 300 + 200 + 100 + 300 + 100
400 + 300 + 200 + 100 + 300 + 100
= 76.3
= 98.1
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Other Issues in Supply Chain Management
Selecting transportation services
Supplier evaluation
Technology
Inventory management
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Other Issues in Supply Chain Management
Vendor managed inventory (VMI) is where the vendor (a consumer goods manufacturer, for example) monitors and manages the inventory for the customer (a grocery store, for example).
Advantages: Optimize production operations, better control inventory and capacity, and reduce total supply chain costs and the bullwhip effect.
Disadvantages: Often results in higher than necessary customer inventories.
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Research articles on service or product companies and their supply chain performance effectiveness; choose a company that sells a service or a product. Evaluate its supply chain performance effectiveness in terms of responsiveness, technology, and customer-related measures.
DISCUSSION: Operations Strategy
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 9 SUPPLY CHAIN DESIGN
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©2013 OM4 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 9 SUPPLY CHAIN DESIGN
